A forensic accounting firm hired by Royal Group Technologies Ltd. will work flat-out to investigate related-party dealings of the company, executives said in a recent conference call.
Royal Group's auditors, KPMG LLP, will not sign off on the Woodbridge, Ontario, firm's financial results until Kroll Lindquist Avey completes its probe. Royal Group hired Kroll to examine related-party dealings and any areas of concern to probes already under way by the Royal Canadian Mounted Police and Ontario Securities Commission.
Kroll's probe will go beyond its study earlier this year in which it exonerated Royal Group from any wrongdoing in its dealings with a St. Kitts resort controlled by Royal Group founder Vic De Zen.
Royal officials stressed to Kroll that they want a thorough study, but they also want it as fast as practicable.
``We can't tell how long [the study] will take, certainly weeks,'' Royal Group director James Sardo told analysts during a conference call Nov. 10 to announce fourth-quarter results.
Officials downplayed the effects the RCMP and OSC investigations might have on Royal Group's relations with customers and bankers.
``I see no problems of [customers] sourcing from other companies,'' Royal Group President and Chief Executive Officer Douglas Dunsmuir said. ``They know we are working through this.''
Chief Financial Officer Ron Goegan said ongoing investigations ``have made life difficult for all of us,'' but the firm has options to handle C$425 million (US$354 million) in debt due in April. The company's balance sheet is getting stronger and Royal Group is sitting on C$110 million (US$91.6 million) in cash. Royal Group could convert currently unsecured debt to loans pledged to assets or other security.
None of the Royal Group executives would speculate how long the RCMP and OSC probes will take.
``That's why we are conducting our own investigation, to satisfy ourselves whether there was any wrongdoing on the part of the company or individuals,'' said Sardo, chairman of the special committee of independent Royal Group directors. ``Our interest is to preserve value and reduce risk to shareholders.''
Royal Group sales for its fourth quarter, ended Sept. 30, were flat at C$524.8 million (US$437.2 million). Net profit was C$24.4 million (US$20.3 million), compared with a loss of C$78 million (US$65 million) a year earlier. Royal Group, which extrudes pipe and profiles and does some compounding, will switch its fiscal year to coincide with the calendar year at the end of 2004.